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Legislative Updates

The below is a summary of significant actions taken by the Arizona legislature as concerns legal issues facing homeowners and homeowner associations. It is important to speak to an experienced lawyer who understands this area of law for additional clarification.

2008 Legislative Session:

Perhaps the most influential of the homeowner association bills that came out of the 2008 Arizona legislative session was a bill that altered the applicability of the Arizona Condominium Act (A.R.S. § 33-1201, et seq.) to include all condominiums, regardless of the date that they were created. See A.R.S. § 33-1201. Previously, the Arizona Condominium Act applied to all condominiums created after January 1, 1986. Prior to the adoption of this bill, the Arizona Condominium Act only applied to condominiums created before January 1, 1986 to the extent that it did not conflict with the condominium association's governing documents (its articles of incorporation, bylaws, and declaration of condominium, "horizontal property regime" or conditions, covenants, and restrictions) or it did not conflict with the Arizona Condominium Act's predecessor.

2009 Legislative Session:

The 2009 legislative session introduced a number of bills of interest to both homeowners and homeowner associations, although many of these bills target specific groups. Please note that, although some of these bills made progress before the Arizona State Legislature, none of these bills have passed as of the date of this update. The Arizona State Legislature adjourned on July 1, 2009. This bill summary does, however, provide insight into the current trends in homeowner association legislation.

One of the most interesting bills before the legislature was HB 2034, which provided that homeowner associations do not have the authority to regulate roadways, easements, or other areas that were dedicated to or otherwise under the authority of a governmental entity. If passed, this bill may have restricted a planned community's ability to enforce rules prohibiting parking on roadways within the association in certain circumstances, among others. This bill passed the Arizona House of Representatives, but failed in a Senate committee.

Also, HB 2625, if passed, would permit a homeowner to "opt-out" of mandatory membership in a planned community. To do so, the owner would have to record a notice of his intention to opt-out and would only be valid for that specific owner. Any recorded notice of intention to opt-out would not be applicable to subsequent purchasers of the property.

Other proposed bills included, among others:

A bill permitting the installation of solar screens or shade structures (HB 2141);

A bill requiring homeowner associations to adopt bylaws and complete other matters to incorporate and function within 90 days of the termination of the period of Declarant control (HB 2391);

A bill requiring planned communities and condominiums to register with the Secretary of State and to provide certain information regarding the association, including contact information (HB 2430);

A bill permitting homeowners to circulate petitions for amendments to an association's community documents (HB 2454);

A bill prohibiting planned communities from restricting the installation of amateur radio station emergency communications antennae and related structures of reasonable height and dimensions (HB 2514);

A bill permitting the installation of rainwater catching devices designed as a water saving device (HB 2518); and

Again, the legislature appears concerned with energy saving issues (HB 2141, HB 2518, and HB 2542), homeowner rights and oversight (HB 2454 and HB 2625), and association operations and transparency issues (HB 20343, HB 2391, and HB 2430). The bills proposed are largely "homeowner" friendly by placing limitations on a homeowner association's restrictions and authority to regulate. Although these bills did not pass during this legislative session, it appears that Arizona's congressmen and congresswomen are concerned with protecting homeowner rights.

2010 Legislative Session:

With the 2010 regular legislative session now ended, below is a recap of some of the bills that may be of importance to real estate owners:

HB 2766: Requires a landlord to provide a tenant with a specific notice of foreclosure with a lease if the lease is entered into after the initiation of a foreclosure action. A failure to do so can result in a damage award against the landlord. This requirement does not apply to multi-family units consisting of 4 or more connected units.

HB 2626: Requires certain lenders to contact borrowers to explore options to avoid foreclosure on the borrower's principal residence at least 30 days prior to the recording of a notice of trustee's sale. This bill applies only to properties with a first deed of trust recorded between January 1, 2003 and December 31, 2008 and contains a delayed repeal date of December 31, 2013. This bill also only applies to certain types of loans.

SB 1202: Changes and adds to the post-trustee's sale proceedings for the distribution of excess proceeds from the sale, including by requiring the trustee to notify the trustor by certified mail, sent to all known addresses, of excess proceeds from a trustee's sale and requiring the trustor to send a conformed copy of a complaint related to sale proceeds to all parties entitled to notice. The trustor can now be dismissed without prejudice after filing the complaint and a certificate of mailing with the certified mail receipts. Also, the bill adds requirements regarding notification by an applicant seeking the receipt of proceeds to provide notice thereof and increases the response time thereto.

HB 2768: Generally prohibits the enforcement of provisions concerning real property that purport to (1) bind successors in title to a specific property and (2) require either the transferor or transferee to pay a fee to a Declarant or third-party on transfer of an interest in the property. An important exception is for nonprofit associations for the sole purpose of supporting recreational activities within the association (i.e. most homeowner associations).

HB 2345: Expands the prohibition of restrictions on the display of industry standard size "for sale" signs to include both open house signs and "for lease" signs in planned community and condominium associations. This prohibition does not apply to association common areas. Further, HB 2345 prohibits the association from restricting open house hours, except for prohibitions on open houses before 8 a.m. or after 6 p.m.

HB 2371: Expands the definition of home inspections to include the inspection of pools and spas as components that must be visually inspected pursuant to rules adopted by the Board of Technical Registration.

Perhaps most surprising though was what was not passed in the realm of Arizona's real property law. The Arizona State Legislature did not revisit changes to the anti-deficiency statute (A.R.S. § 33-814), which prevents a lender from obtaining a deficiency judgment after a trustee's sale on certain properties.

As you may recall, last year, a bill was passed that had a huge impact on the anti-deficiency protections afforded to a large class of property owners. This bill would considerably limit those protections, but before it could into effect, the Legislature repealed it and reinstated the "old" language. Because of apparent concerns about the repeal and reversion, the Legislature subsequently repassed a repealing bill in November 2009. But, the legislative history of that bill shows an attempt to resolve concerns about the over-inclusive language of the initial bill were discussed. If passed, this amended language would have impacted construction loan deficiencies, particularly with regard to "spec" homes. Although no bill on this issue was passed during the last legislative session, with home prices still low and many homeowners "underwater" on their loans, we probably have not heard the last on this issue.

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